What Attracts Foreign Multinational Corporations? Evidence From Branch Plant Location in the United States

Abstract

The location decisions of foreign multinational corporations (FMNCs) are analyzed using a conditional logit model with states as the choice set. We consider the establishment of new manufacturing plants and separately analyze the site selection of all MNCs, Japanese MNCs, and European MNCs. The results indicate that access to markets, labor market conditions, state promotional efforts to attract foreign investment, and state and local personal taxes are significant fadors in the location decision. The decision determinants for Japanese and European MNCs are found to be different.

Strategic Investments in the Pulp and Paper Industry: A Count Data Regression Analysis

“…Coughlin et al (1991) report that a ten-percent increase of the wages will reduce the likelihood of investments by around 44 percent and that ten percent higher GDP per capita increases investments by 60-70 percent. Braunerhjelm and Svensson (1996) …nd positive e¤ects of industrial agglomeration and market size, while Friedman et al (1992) report that the wage level, the tax rate, access to a harbour and average labour productivity are the most important determinants of investments.…”

“…Again, factor prices are often not the main focus in empirical studies, despite the great attention paid to factor endowments and factor prices in the theoretical international economics literature. Bartik (1985), Coughlin, Terza and Arromdee (1991) and Friedman, Gerlowski and Silberman (1992) use multinomial logit regression models to analyse where to locate an investment, (e.g., in which US state). Braunerhjelm andSvensson (1996) andÓ hUallacháin andReid (1997) use Tobit regression models to address how much investments that go to a certain country/state.…”

What is the environmental performance of firms overseas? An empirical investigation of the global gold mining industry

“…Only one indicator -an index measure of the strength of state environmental regulations -was consistently signi…cant but the magnitude of its coe¢ cient was small and economically had little signi…cance. McConnell and Schwab (1990) and Friedman et al (1992) also …nd little support for the claim that environmental stringency may have determined the location decisions of foreign investment in new manufacturing branch plants between 1977 and 1988. Using pollution abatement expenditures per state gross product originating in manufacturing industries, Friedman et al 1992 …nd that only if Japanese branch plants are included is environmental stringency signi…cant and negative, indicating that Japanese MNCs (multinational corporations) did not tend to set up in states where pollution control costs were high.…”

Re-Investment and the Survival of Foreign-Owned Plants

“…The promotion of foreign direct investment (FDI) is an important economic development objective of governments and agencies throughout the industrialised world (Friedman, 1992;Kim et al, 2003;and Crozet et al, 2004). However, success in attracting the plants is blighted by their failure, with exit hazard rates for multinational and foreign-owned plants up to 40 per cent higher than for domestic plants with similar characteristics (Görg and Strobl, 2003;Fabbri et al, 2002;and Colombo and Delamstro, 2000).…”

“…The annualized exchange rate for 2 and 5 years after the date of the initial investment were used, of which the latter is better performing. Finally, FDI from different source regions exhibits different investment behavior (Friedman et al, 1992), possibly due to economic or cultural reasons. Dummies are included for whether the initial investment is from North America (mainly US), Western Europe (mainly the near Continent and Scandinavia) or the Far East (mainly Japan).…”